Will cash transfers be the new game-changer?

The belief in the Sonia Gandhi-led National Advisory Council (NAC) that it was the rural employment scheme, and not the nuclear deal, which led to the Congress's 2009 victory, might be an exaggerated assessment. But a similar policy of empowering the underprivileged through a policy of cash transfers is likely to help the party cross the electoral Rubicon in two years' time.

Although the issue of the government directly depositing cash in the bank accounts of the needy has long been in the public domain, the government has been reluctant to take any initiative till now because of stout resistance from the opposition parties. Even today, critics of the measure remain active. Among them are not only the habitual nay-sayers - the communists - who have a problem for every solution but also the former civil society activists under Arvind Kejriwal, who have now formed the Aam Admi Party (AAP).

They see the cash transfers as a bribe to voters at the tax-payers' expense. But so was the employment scheme, which guaranteed a payment of Rs 120 per day for nearly three-and-a-half months of manual labour. The advantage, however, with cash transfers is that it eliminates the middlemen who are responsible for the "leakages" in the employment scheme. As a result, the longstanding calculation that only a fourth of the doles meant for the poor reaches the target, as Rajiv Gandhi suspected, will no longer vitiate the subsidy regime. What is more, an effective control of the subsidies will bring down the inordinately high fiscal deficit.

There may be problems, of course, as there are with any project. One of them is the possibility of the cash being misused via expenditure on items for which the grant is not meant. But such criticism underlines a paternalistic outlook, which presupposes that the government knows better what is good for the recipients than the latter themselves. Another problem is the misdirection of the cash transfer to accounts which are in the names of non-Indians, e.g., illegal Bangladeshi immigrants, as has been suggested, since the biometric identity proofs under the Aadhar scheme do not certify the person to be an Indian citizen. But this is too far-fetched a possibility to be taken seriously.

However, what the floating of these ideas suggests is that the opponents of the move will go to any length to discredit it. Their objective is clearly political since they seem to have realized that the new scheme may be of considerable benefit to the Congress. True the Congress itself is motivated by the same objective. But that should not lead to the trashing of an idea merely because it has been advanced by the ruling party at the centre. Instead, the focus should be on a clear-sighted examination of its pros and cons and to give it two cheers if the plus points outscore the minuses.

Politics in India, however, rarely follows such a logical course. Hence we see the curious spectacle of the opposition parties frustrating the government's efforts in a direction which they had supported when in power. Foreign investment in the retail sector, for instance, was on the Bharatiya Janata Party's (BJP) agenda when it ran the government at the centre, but it is now vehemently opposing the measure.

While politicians are calculating the gains and losses of their parties vis-a-vis the new scheme, which is being tried out in India for the first time unlike in Latin America, especially Brazil, where it has been in vogue for several years, the ideologues are looking at cash transfers through their customary tinted glasses. One of their objections relates to a spurt in inflation, which may be caused by the infusion of a large amount of ready money into the economy. The other is the dependency which the beneficiaries may develop with the unearned income flowing into their bank accounts. However, the second trait has also been regarded as unwarranted since, except for a few wayward individuals, the indigent are unlikely to act as spendthrifts. Instead, they will learn to save and invest.

Left-wingers like the economist, Jean Dreze, have welcomed the cash transfers, but with the proviso that these should supplement the "public provision of health, education and other basic services", as in Brazil. But, in their blind preference for the public sector, they have overlooked the dismal state of primary health centres and government-run schools, especially in the villages and small towns. Arguably, the extra money for the poor will enable them to opt for better hospitals and schools in the private sector.

Although it will obviously take time to prove whether the new scheme will be a game-changer, as union Finance Minister P. Chidambaram and Rural Development Minister Jairam Ramesh believe it to be, it should be allowed to run its course and not castigated by the opposition parties from the start.